The high cost of sprinkler systems is not easy for some Rhode Island businesses to bear, with the tab adding up to tens and even hundreds of thousands of dollars.
But the Pawtucket Business Development Corporation wants to help firms in that city comply with the Comprehensive Fire Safety Act of 2003, which revised the state’s fire codes into some of the most stringent codes in the nation – the result of the fire that took 100 lives at The Station nightclub in West Warwick three years ago.
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The nonprofit is in the midst of discussions to offer financial relief in the form of low-interest loans that could range from $3,000 to $30,000 to help businesses with the cost of sprinkler systems, said President Greg Scown. A vote on the program is scheduled for March 29.
The fire code mandates establishments that serve alcohol and have occupancy capacities of at least 150 people install sprinkler systems by July 1 of this year. Venues with capacities of 300 or more had to install sprinklers by last July 1.
“This is something that ever since the fire code issue came up, we’ve been concerned about restaurants and bars in the city because of the expense,” Scown said. “We didn’t want to see anyone lose business or move out.”
The idea had been kicked around for the past year, said Herb Weiss, economic and cultural affairs officer for the city. “There’s nothing specially geared toward the high cost of bringing buildings up to code and how to pay for it,” Weiss said.
Though the U.S. Small Business Administration’s Rhode Island chapter offered sessions about the new codes and a loan program after the law was enacted, said Mark F. Hayward, SBA district director, the agency has no statistics to track how many businesses are using the funds to add sprinklers.
SBA’s program involves linking businesses with lenders who’ve agreed to charge low interest rates. Hayward said he’s not sure how many have taken advantage of the loans for sprinkler retrofits because the loan guarantees the SBA supplies lenders are pulled from its general fund. A business could say the loan is for leasehold improvements.
Hayward did say, however, that the SBA has received more calls lately from businesses inquiring about loans for sprinkler systems.
The Pawtucket program would differ from the SBA’s in that the lender is a nonprofit that provides gap financing.
“We provide loans to businesses unable to get loans from banks,” Scown said. Businesses might have to provide 10 percent of the project cost in the form of cash equity, but that is a preliminary estimate. No requirements have been finalized.
The nonprofit would determine the interest rate, which would be fixed for the first five years of a 15- to 20-year loan.
Banquet hall owner David Emery, of Le Foyer Club in Pawtucket, said the installation of his sprinkler system is 50-percent complete. But “financing was tough,” he said of the $120,000 system. “That’s a heck of a lot of money for small companies.”
There is no question he would have taken advantage of the corporation’s program if he had known. In fact, Emery said he did assume state officials would provide some type of fiscal relief. But when he checked different agencies as he was starting the installation, he found no help.
Le Foyer’s two-story building is about 10,000 square feet, with a current capacity of about 400, he said. Emery estimates the building is about 80 years old. The banquet hall is open seven days a week, which made finding time for the installation difficult.
“We’ve been working through the night,” he said, adding that to keep from closing, he shifts customer events from one room to another while the installation takes place.
Under the new fire codes, Emery also has lost some 100 people from capacity, and he expects that loss and the cost of the sprinkler system will have an impact on his bottom line for years.
“There have been people that have closed because they can’t afford it,” said Steve Lombardi, owner of Lombardi’s 1025 Club in Johnston and a member of the R.I. Hospitality and Tourism Association’s executive board. It might be difficult for some hospitality businesses to qualify for loans because they might not have the cash equity needed, he said.
Lombardi suggested the state use a portion of proceeds from the state’s 1 percent meals and beverage tax to help offset sprinkler costs for businesses in the form of grants, not loans.
But until a better solution presents itself, Pawtucket’s business development corporation hopes its proposed loan program might keep its businesses from suffering or shutting down.
“The city has been successful in attracting an arts community and other businesses to the city,” Scown said.
